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Gijima rolls over debt

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 30 Sept 2014
Robert Gumede's Guma Holdings is underwriting a R100 million rights offer by Gijima.
Robert Gumede's Guma Holdings is underwriting a R100 million rights offer by Gijima.

Although Gijima has narrowed its net loss, it seeks to raise R100 million by issuing shares and has rolled its debt obligations over as it continues to face challenging market conditions.

In the year to June, its net loss came in at R153 million, a vast improvement on last year's R294 million, but it notes - despite "vast" internal improvements, it continues to face tough trading conditions, and was not able to comply with the financial covenants for its R213 million in debt.

Gijima has now entered into a new deal with its financiers, pushing out the due date of the debt into equal tranches due between 2017 and 2020.

"The company can confirm that it will be able to pay its obligations when they become due and comply with securitisation financial covenants based on budgeted and forecasted cash flows in future," it says.

However, this roll over comes with a price, as the interest rate applicable moves up from 4.5% to 6%. In addition, Gijima is issuing shares to raise R100 million - over and above the R150 million it raised a year ago. This issue is fully underwritten by its major shareholder, the Guma Group of companies, founded by Gijima's chairperson Robert Gumede.

Gijima says it has budgeted for sufficient cash flow to meet its obligations, but notes it if is not able to raise the cash, roll debt over, and meet its budget, "there exists a material uncertainty which may cast significant doubt about the company and subsidiaries' abilities to continue as going concerns".

During the year, Gijima turned over R1.5 billion, a decline on 2013's R1.8 billion, but renewed all its contracts in the private sector and repaid R41 million in debentures. Its turnaround, which has now been underway for about a year, resulted in savings of R200 million.

It notes the board is comfortable with the turnaround strategy and that it is showing progress. This is the second time in recent years that the group has needed to be right-sized.

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